German jobs marketremains under pressure

5 May 2004

NUREMBERG – Despite Germany’s unemployment rate edging down to 10.7 percent in April from 10.9 percent in the previous month, the nation’s labour market remains under pressure with the numbers out of work jumping by more than expected in seasonally adjusted terms, the Federal Labour Office said Wednesday.

While the Labour Office data showed unemployment in Europe’s biggest economy falling by 104,000 in seasonally unadjusted terms, the more market sensitive seasonally adjusted number jumped by 23,000 to 4.367 million in April.

Economists had forecast a rise of 16,000 in seasonally adjusted terms with the slow pace of recovery in Germany failing to result in a major boost to hiring and high unemployment serving to dampen consumer spending at a crucial time in the upswing.

“Economic growth is too weak to boost the labour market,” said Labour Office chief Frank-Juergen Weise.

Instead of launching new employment drives, economists say employers are continuing to try to hold down costs to help compensate for this year’s rise in the euro and more recently the threat posed by surging energy prices.

“All in all, we don’t expect the German economy to generate a noticeable number of new jobs this year and look for an outright contraction in payrolls for the full year,” said Elga Bartsch, European economist with the US investment house Morgan Stanley.

Unemployment rate will dip to 10.2 percent this year from 10.3 percent last year, Germany six leading economic institutes said in a downbeat forecast contained in their twice-yearly report released week.

The German government last week scaled back its 2004 growth forecast to just 1.5 percent, which falls short of the two percent growth rate that many economists believe is necessary to stimulate the labour market.

While opposition members seized on the data as evidence of the government’s failure to address the problems of the job market, Labour and Economics Minister Wolfgang Clement insisted Wednesday that the government would achieve its goal of pushing the jobless numbers down below the politically sensitive four million mark by September or October.

But with Germany facing a string of regional, state and European elections this year, the fraught state of the nation’s labour market will add to the political pressure on Chancellor Gerhard Schroeder’s ruling Social Democrats, who have been hit by a slumping polls as a result of deeply unpopular reforms and a meagre economic growth rate.

Indeed, what is worrying for the government is that the data appears to point to the impact of the batch of labour reforms it introduced last year and which initially helped to trim dole queues as starting to peter out.

The result is that high jobless rate is threatening to cancel out the benefits of the government’s big tax cuts launched at the start of the year with retail sales in the country slumping and consumer confidence stagnating as fears about unemployment have grown.

Coming ahead of a meeting of the European Central Bank’s rate-setting council on Thursday, the latest set of grim German unemployment numbers is also likely to result in fresh calls for the ECB to cut interest rates as a way of spurring growth.

Further underscoring the bleak state of the German labour market, the latest official figures showed employment continuing to contract and shrinking by 20,000 in February after falling by 16,000 in January.

Moreover, the number of job vacancies in the country has continued to slump, falling by 6,000 in April after dropping by 10,000 in March.

While unemployment in western Germany rose by 12,000, in the more economically hard pressed eastern part of the country jobless numbers increased by 11,000. This produced an increase to 10.5 percent in the national seasonally adjusted rate in April, compared to 10.4 percent in March.

In unadjusted terms, there were 53,000 fewer out of work in April than for the same month a year ago with the arrival of the European spring normally marking an improvement in the jobs market as the service and building sector picks up.

DPA

Subject: German news